By: Axel M. Hansson, partner and Ida C. Stavnes Høisæther, partner
Introduction
Historically, investments in real estate in Norway has produced high returns. In a long-term perspective, property will usually give a high yield, also taking into account the tax benefits. In our experience a major part of our clients’ capital is invested in real estate, and we see an increasing trend also from clients abroad seeking legal assistance with establishment, management and further investment in both residential and commercial property. As property investment with foreign ownership is increasing in Norway, we hope this article is relevant for our international partners.
Property in Norway
82 % of all Norwegians own their residence. On average every second Norwegian has access to vacation homes. This is a significant difference compared to our neighboring countries. Norway has beneficial tax rules related to ownership and realization of property, specifically rewarding such investments. Own residence, part of residence and leisure property can largely be rented out and sold without risking capital gain taxes.
Less than 70 % of Norway’s municipalities have enforced property taxes, where between 1 and 4 per mille of the property value is taxable per year. Wealth tax is payable upon a fraction of the property market value. The property equation value is set at 25-90 % of the property market value, depending on the type of property. Should the tax subject have net wealth exceeding MNOK 1,5 only 0,85 % is payable as wealth tax.
Disregarding the comprehensive exceptions for own residence and leisure property, capital gain taxes are 22 % of the net gain. Please note that Norway does not enforce any upper limit to how high the value of your residential or leisure property can have.
In our experience, the tax situation in Norway is very beneficial compared to many European countries. A significant difference seem to be the transactions costs, mainly to the state. Such transaction costs are considerably higher in many European countries. Disregarding marginal charges and the aforementioned taxes, only 2,5 % of the property market value is charged by the land registry. Such registry is also completely optional, which allows for avoiding the registry charge altogether. Registry is first and foremost necessary to secure legal protection from creditors.
Market – value
Property prices have evenly increased since the 1950s. Since 2017 the property prices in general have increased by almost 60 %, and the prices increased considerably during the covid-19 pandemic. Property has been and is still regarded as one of the most secure and profitable investments in Norway.Almost everyone with the necessary means place most of their capital in property. Young people aim to access the property market as early as possible, often in their early 20s, many Norwegians invest in either rentals or leisure property, or both, and an overwhelming majority of available private and corporate capital is in some way bound in property.
Foreign owners
Disregarding co-ops and licenced agricultural property, acquisition of property is unlimited and fully open to foreign owners, unlike for instance Denmark. Any foreigner can own property in Norway, given that the beneficial owner can be fully identified and are in compliance with additional AML requirements.
Conclusion
Hansson Law provides full range of legal service to property owners, both privately and professionally. Several of our large clients are property owners, and a major part of the privately held assets is property. Understanding how and when property should be handled, managed and transferred is a central part of our counselling, as well as providing assistance within generational shifts, yield, regulatory matters and legal sides alike. Taking into account the beneficial tax situation, the financial stability and the moderate bureaucracy and «red tape», investing in Norwegian property may be lucrative for our international partners and clients.